Tax initiative slimmer, not clearer

BOISE – Sponsors of a lengthy, complex property tax-limiting initiative submitted a new version of their measure Wednesday, but didn’t change provisions that the Idaho Attorney General found violated the Idaho Constitution four different ways.

“We brought it up to all of our supporters across the state. Everybody says, ‘We don’t care, we’ll go to court,’ ” said Charles Cline, chairman of Idaho Property Tax Reform Inc. “We want to make the change.”

The attorney general’s review is advisory – sponsors are free to go forward despite it, though they risk the measure being overturned in court or by the Legislature.

The initiative would cap property taxes at 1 percent of value, and redefine value to freeze it, then allow increases of 0.8 percent per year. It would reset the value to the sale price when a property sells. The measure also would make a long list of other changes in property tax laws, including eliminating the homeowner’s and farm exemptions.

The initiative originally stretched to nearly 100 pages. The new version is 62 pages, but Cline said that’s mainly because “the attorney general allowed us to not have to print deleted lines.” Plus, by updating the language in the initiative to reflect changes in tax laws that the Legislature approved in its 2005 session, the initiative lost about 10 pages, he said.

“We’ve made no major changes,” Cline said. “They’re all minor.”

In his review, Wasden identified more than a dozen serious technical problems with the measure, and wrote that it “cannot be implemented as written.”

The measure, Wasden found, was inoperable because it didn’t say how Idaho’s multiple overlapping taxing districts, each of which answers to its own electorate, would come up with a total tax rate for any specific property of 1 percent or less.

Cline said he fixed that with a simple addition. “We just added one line,” he said. “It isn’t that hard.”

Here’s the line he added: “In the 2003-2004 tax year each tax district levied a fraction of the available real property tax revenue. This fraction shall be the established tax levy rate for each taxing district.”

Dan John, tax policy manager for the Idaho Tax Commission, and Alan Dornfest, the tax commission’s property tax expert, both were puzzled by the new language. John wondered if it meant that each district was frozen at its previous tax levy rate, but Dornfest noted that could violate the 1 percent cap.

Dornfest said the problem is there’s no single percentage that a taxing district takes of “the available real property tax revenue.” One homeowner, for example, could live within a city, a county, and a school district. If each district levied a half-percent in taxes, each would be getting a third of that taxpayer’s taxes. But a nearby homeowner might live in a fire district as well as the same city, county and school district. If the fire district also levied half a percent, each district would be getting a quarter of the revenue from that taxpayer.

“Which proportion do we use to adjust with – the third or the quarter?” Dornfest asked. “I can’t tell from the language.”

Cline explained it like this: “Everybody’s gonna see the same fraction that they seen … as far as every taxing district. But of course that fraction is of less money.”

John said if Cline’s intent was to reduce the budgets of all taxing districts proportionally to get the total below 1 percent, “it needs to be specified how it’s done and who does it.”

The problem is the same one that stymied the One Percent Initiative passed by Idaho voters in 1978. The measure, in addition to raising constitutional questions about whether properties were being taxed uniformly, didn’t specify how it would work with Idaho’s system of multiple, overlapping taxing districts. So the Legislature amended it to instead impose caps on local government budgets, some of which remain in effect today.

Cline said he’s not worried about collecting more than 45,000 signatures – the number he’ll need to place the measure on the November 2006 ballot – and plans to use no paid signature-gatherers.

Asked about a legislative committee that’s working on major property tax reform proposals, Cline said, “I won’t even make a comment to it. They’ve been working on this for 27 years and haven’t come up with anything.”